Dairy-state farmers have scored a one-year extension of milk price subsidies, but they are already gearing up for the bigger fight of perpetuating the program beyond 2008.

The Milk Income Loss Contract (MILC) program, which pays dairy farmers for losses when the price of milk dips below a government target, is set to end in August — one month before the 2002 farm bill (PL 107-171) expires.

The $283 million temporary fix, attached to the House’s $124 billion-plus war supplemental (HR 1591), would keep the program funded through fiscal 2008 but does nothing to guarantee that the subsidies will be included in the farm bill that Congress is set to write this year. Because the program’s authorization expires before the current farm bill, the cost of the dairy subsidies is not built into the baseline budget for the new farm bill.

“It’s not in the baseline, so it will compete with other programs,” said House Agriculture Chairman Collin C. Peterson, D-Minn. “There are a lot of commodity [crop] farmers who won’t want to give up that money.”

The MILC program has long been a source of friction between big California dairy producers and smaller operators in the Midwest and Northeast. West Coast producers say the subsidies give competitors in other regions an unfair boost, especially with the price of milk falling below the government-set price in recent years. Budget hawks also have criticized the program.

Lawmakers expect a lobbying barrage on extending MILC during the farm bill deliberations. But crop groups already fighting for a share of the tight farm bill baseline will not welcome competition from supporters of MILC, which could top out at $3.8 billion over five years.

Without the authorization, backers of the dairy subsidies would have to scrap for annual discretionary appropriations. Even with Wisconsin Democrat David R. Obey holding the House Appropriations Committee chairmanship, relying on annual discretionary funding would make the MILC program vulnerable to points of order and amendments, supporters worry. Also, Obey would lose his chairmanship if Republicans were to recapture Congress in 2008.

“At the end of the day, we want a program that is predictable,” said Christopher Galen, spokesman for the National Milk Producers Federation, a group that represents dairy farmers nationally and supports some kind of milk payment in the farm bill. “It would make it a lot easier to deal with.”

When the 2002 farm bill was written, the MILC program was authorized until September 2005, largely because budget- conscious lawmakers were concerned about its cost. But in 2005, supporters of the milk subsidies won a two-year extension until August 2007.

Western dairy farmers thought they had killed the program once and for all by terminating it a month before current farm law expires, which ensured that MILC’s cost was not built into to the next farm bill’s budget.

Because MILC is not built into the baseline, Peterson worries that an extension through the farm bill could be vulnerable on the floor to a pay-as-you-go point of order. Under House pay-as-you-go rules, increases in mandatory spending must be offset by cutting other programs.

Still, there is plenty of support for the milk subsidies in both the House and Senate Agriculture committees. In previous debates, lawmakers with little stake in the dairy industry voted to preserve the program in return for votes on other issues, an agricultural lobbyist said.

“Don’t fool yourself into thinking this will come down to regionalism” the lobbyist said. “This will not be determined by raw votes.”

Obey said that although he hopes the program will ultimately be funded through the farm bill, he is willing to use his position meanwhile as the top House appropriator to ensure that the subsidies survive.

“I don’t like it, but I compromised,” Obey said. “And I was willing to compromise to move the program forward.”